Congress sends payroll tax cut bill to Obama

Feb. 18, 2012 12:00 AMAssociated Press

Americans are getting an election-year tax present. Congress voted with rare speed and cooperation Friday to extend a Social Security payroll-tax cut for 160million workers and to renew unemployment benefits for millions more who haven't seen a paycheck in six months.

With lawmakers' ratings in the gutter, the legislation sped through both the House and Senate and was on its way to President Barack Obama, who saluted the quick passage.

Taxpayers have grown accustomed to the 2percentage-point cut in the payroll tax over the past year -- about $80 a month for someone earning $50,000 a year, and the reduction now will be continued for the rest of 2012. So will jobless benefits averaging about $300 a week for the long-term unemployed, although the aid will be cut off sooner than before for many recipients.

Both provisions, which were to expire in less than two weeks, had been extended only two months during a December congressional fight that seared Republicans. They were determined to avoid a repeat in campaign season.

The hard-fought but ultimately bipartisan measure contains the core of Obama's job agenda and promises to pump more than $100billion into the economy before Election Day. It hands the president a political victory, as well, as Republicans called a tactical retreat in hopes of minimizing the gains for Obama and his Democratic allies on Capitol Hill.

The Senate approved the measure on a bipartisan 60-36 vote minutes after the House passed it on a sweeping 293-132 vote. Obama is expected to sign it shortly after returning from a West Coast fundraising swing.

The hope is that the dual measures will inject consumer demand and support a fragile recovery from the worst economic downturn since the Great Depression. The legislation would also protect doctors treating Medicare patients from a steep cut in their reimbursements under an outdated funding formula, a reduction that threatened to make it harder for seniors to find physicians.

The tax cuts, jobless coverage and higher doctors' payments will all continue through the end of the year.

Many Republicans opposed some or all of the legislation but were eager to wipe the issue from the election-year agenda. The measure would pack $141billion onto the federal deficit over 2012-13 and slowly recoup more than $50billion of that over the coming decade.

It may also be the last major bipartisan legislation to make it through a bitterly divided Congress before Election Day. A pile of unfinished business -- including expiring tax cuts, Pentagon budget disputes and another hike in the nation's borrowing cap -- awaits after the election in what promises to be a brutal lame-duck session that Capitol Hill veterans are already dreading.

"It is amazing what happens when Congress focuses on doing the right thing instead of just playing politics," Obama said at an appearance at a Boeing factory in Everett, Wash. "This was a good example, and Congress should take pride in it."

In fact, politics has been woven into the struggle over the legislation, which, along with the divisive GOP primary campaign and improving economic news, has coincided with a lift in Obama's poll numbers.

Friday's votes also cleared away a political headache for House Republicans, still smarting from the battle in late December in which they blocked a two-month extension of the tax cut and jobless coverage, only to retreat after being portrayed as standing in the way of a tax cut for every American who earns a paycheck.

Since then, Republicans have made it clear they didn't want a repeat of the December disaster.

"We're dumb, but we're not stupid," Sen. John McCain, R-Ariz., told reporters after he voted. "We did not want to repeat the debacle of last December. It's not that complicated." McCain voted no, in part because the measure gives television-broadcasting companies $1.75billion in exchange for freeing communications spectrum for auctions to wireless companies.

Democrats took advantage of the GOP's loss of leverage in this month's House-Senate talks, forcing Republican negotiators to drop numerous House GOP provisions, including an effort to block new Environmental Protection Agency rules on industrial boilers, a pay freeze on federal workers and an attempt to deny illegal immigrants a refundable child tax credit taken by low-income workers.

The top GOP negotiator, Rep. Dave Camp, R-Mich., said the final deal was the best Republicans could get given the balance of power in Washington.

In a GOP victory, coverage for the long-term unemployed would be cut from the current maximum of 99 weeks to a ceiling of 73 weeks by this fall in states with the worst job markets, with most topping out at 63 weeks. Arizonans currently receive a maximum of 79 weeks of aid.

Extending the 2-point cut in the 6.2percent Social Security payroll tax would save a maximum of $2,200 for high-end earners. The reduction in the payroll tax, which is deducted from workers' paychecks, would cost $93billion through 2022. In a sudden concession this week that made bipartisan agreement possible, House Republicans dropped their demand that the tax cut be paid for with spending reductions.

Of the $30billion cost of the extended unemployment benefits, half would be paid for by government sales of parts of the nation's broadcast airwaves and half by requiring federal workers hired after this year to contribute an additional 2.3percent of their pay for their pensions, up from the current 0.8percent.

Other costs would be made up by trimming Medicare reimbursements to health-care providers to cover unpaid medical bills, cutting payments to hospitals that treat large numbers of poor patients and cutting a fund created in Obama's health-care overhaul for prevention efforts like battling smoking and obesity.